Realcomp, our MLS, sends me real estate statistics every month because I asked to be on the special list of recipients of real estate stats. Along with their report comes a note that says the stats are not for redistribution. Hence, I have not been publishing them on my blog. But our association of Realtors is sending a link with their report. It does not come with a “not for redistribution” warning. So I can share this report on 4th quarter Oakland County real estate stats with you!
[tags]oakland county real estate, birmingham mi real estate, bloomfield hills real estate, royal oak real estate[/tags]
Written by Maureen Francis
SKBK Sotheby's International Realty, 248.430.4450
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{ 7 comments… read them below or add one }
Russ 02.03.08 at 2:02 pm
Now is a great time to buy!
Then look what happens…
39% drop in median sale price in Rochester?
21% in Southfield?
30% in Bloomfield?
That lovely leverage kind of wipes out your down payment doesn’t it?
Russ 02.03.08 at 2:03 pm
What are the drops in median sales prices since 2005?
Maureen Francis 02.04.08 at 8:09 pm
Russ,
It is pretty impossible to time the market to know what will happen next.
I did not do reporting in this same format back in 2005, but there are monthly reports in my archives. Here is a link to Birmingham for December 2005.
Maureen
Russ 02.07.08 at 4:53 am
Thanks Maureen.. I disagree wit the timing comment. When the market pricing of these houses got out-of-line with traditional affordability measures (the salaries of the people iving in them) then the market was set to bust. When speculators were buying large numbers of properties that were cash-flow negative, expecting price appreciation to turn a profit for them, bust ahead.
When local incomes get reduced due to employment events (HELLO AUTO INDUSTRY) then house prices can be expected to fall. When the college graduates I worked with when they were co-ops- decide to leave because the only offers they got were in Chicago and Miami then …..
When the credit crunch unfolded becasue those subprime loans weren’t getting paid back, and the buyers of those securities lost billions, then they might rationally tighten up on lending standards in the future. When lending standards tighten.. well you know what comes next….
And when those subprime loans continue to reset, and the “owners” can’t refinance, desperately trying to sell? How does that affect prices? Consider that the resets are just getting started- there are more ALT-A and “PAY Option” loans compared to subprime ones. Those will be resetting predominantly in the next 18 months according to publicly available stats I’ve seen. Most of those pay options from 2004-6 are guaranteed to be upside-down now (Oakland co. stats). Think they are going to keep making payments? Want to buy a bridge?
When gangs of vicious realtors teamed up with seamy mortgage brokers and dastardly straw buyers to commit mortgage fraud and pump up the neighborhood “comps”, then guess what happens as a result? lending statdards tighten and then neighborhood prices drop as the bank forecloses on those loans. Mortgage fraud is turning up everywhere the FBI looks this year. They can’t add staff fast enough to prosecute all the cases.
….. Helen Keller and Stevie Wonder could have seen these price drops coming from like 2005. The difficulty is in getting meaningful data from the industry groups to allow people to see through the spin. Zillow, for example, was listing foreclosures as “sales” which prevented teh observing of real data.
I’m not alone in seeing this coming. recently there was so much short selling of homebuilders and mortgage lenders that there was no more stock available to short from a list of them. The short interest in (CFC) Countrywide was record-breaking.
Morgan Stanley adn other Wall Street firms have predicted more price declines (on he record) through next year. And PAst real-estate slumps have always taken several years to play out. This one is just getting started.
And OHMYGOD you should see Foreclosure neighborhoods in Cleveland and the number of houses now empty sitting in SAcramento, Miami, Phoenix, etc. This thing isn’t even local to Se Michigan- Its nationwide. some declines strike sooner, some later. But several formerly hot markets succumbed- just later than others. Some areas will be immune but not the broad suburbs of a metro area like Detroit.
You showed uncommon class in posting that stuff here. Hat tip! I sent it to several friends who I have convinced not to buy so far… and I htink I saved them from making a disastrous financial decision. Why purchase a house just to see your down payment vaporize into thin air 6 months later?
Russ 02.09.08 at 11:54 am
Mainstream media stories on walking away:
Jingle Mail:
http://money.cnn.com/2008/02/06/real_estate/walking_away/index.htm?
http://wallstreetexaminer.com/blogs/winter/?p=1398#more-1398
Rust Belt cities, already beaten down by a miserable economy before foreclosures began spiraling nationally, are moving to cut the number of houses left vacant when the mortgage can’t be paid. At stake are valuable tax dollars and the survival of neighborhoods. “The homeowner just assumes, well the bank’s going to take my house, but the bank can make the economic decision not to take the house,” said Cindy Cooper, a Housing Court prosecutor in Buffalo. “Then that leaves two parties walking away, each one thinking that the other is going to take care of the house.”
Do consult with an attorney
Maureen Francis 02.10.08 at 6:13 am
OK, Russ, I get that you don’t care for Ken’s opinion of walking away, but since you don’t even own, I am wondering what your motivation is for posting all over this blog about it? Are you feeling like you need to tell people they should be doing it?
Clearly “Helen Keller and Stevie Wonder” did not see the price drops of this magnitude coming, or lending standards would have tightened up BEFORE the perfect storm hit. Michigan has been feeling the pain longer than most of the country because of the auto industry.
The housing market is dependent on J-O-B-S. When Michigan creates more of them than it loses, then we can expect a rebound.
Russ 02.12.08 at 2:10 pm
Motivation? Several of my friends / colleagues finding themselves underwater. TRapped in a leveraged, depreciating asset. Those I convinced not to buy in the first place are much better off. That’s motivation. Others have been impoverished by this Ponzi scheme in housing.
Walking away is the next best option from a financial standpoint, if you are massively underwater on your loan and it’s non-recourse (like in purchase money- not refi’s). Most didn’t think they had the option of walking- only now figuring it out. If you haven’t noticed, walking away is getting lots more coverage in the mainstream press now. I guess i can shutup. Wachovia and Bank of America execs have made public remarks acknowledging this practice by homeowners/debtors who can actually afford the payments(they say). I care about people and could give a rats **&^^ about greedy banks.
I want to see housing prices come back to historical levels, in terms of price/rent ratios. Or in terms of price in relation to local incomes. Or in terms of construction costs. All were getting out of bounds nationally and in Oakland county as well. I don’t see any reason RE should get so overvalued in Metro Detroit. It hurts families budgets and civic life when housing is so overvalued, and people must “stretch” to afford a home in a nice neighborhood. It seems ridiculous to pay 170K for a aluminum sided bungalow (1946) in royal Oak with only 2.5 BR and 1 BA. Even if the schools are good.
JOBS is important, but it won’t save you when the price/earnings & price/rent ratios are so out-of-whack that purchasing makes no economic sense.
Eventually, you reach a point where its tough to find a greater fool to buy your house for inflated price. Many of my previous (gainfully employed) neighbors said they could no way afford their current houses at their current salaries. That’s a good sign of a bubble. Id like to buy a nice place without financial suicide. Changing attitudes about RE is required, and the attitudes have started to change. ITs not an investment, though it does historically hold value against inflation. ITs consumption.
—–Walking away is the fastest and economically healthiest way to pop teh financial mania, the asset and credit bubble.
Other reasons: higher housing prices discourage professionals from relocating here. And make our economy less competitive. And high housing prices distort investment in productive enterprises, and reduce people’s savings for retirement. They think that house and asset appreciation will fund their retirement so that they don’t have to save (sorry). These enormous debts give communist Chinese leverage over our nation’s actions. That isn’t good.
See: “America’s inflated asset prices must fall” By Stephen Roach chairman of Morgan Stanley Asia
http://www.ft.com/cms/s/0/5a5419aa-bd47-11dc-b7e6-0000779fd2ac.html
THAT IS A DESCRIPTION OF MY MOTIVATION.
“”Clearly “Helen Keller and Stevie Wonder” did not see the price drops of this magnitude coming, or lending standards would have tightened up BEFORE the perfect storm hit.”"
The price ratios above were seen to be getting out of bounds in 2004-2005. Rampant house flipping and undeserved optimism that “housing always goes up!”, along with “Now is a great time to buy”, and the entrance of cab drivers & supermarket clerks into the real estate “investment” realm pointed to the classical financial mania (Ponzi scheme). Difference was- these people got approved where they would have been turned down in the past. Mania is then destined to be followed by a crash. It was damn easy to see. Caused by reckless lending standards- the mess that Alan Greenspan made.
Lending standards didn’t tighten because of the incentivization of those involved and the underestimation of risk.. Quickly Ill try to explain. Loans were originated without regard to actual credit risk because they were sold onto secondary markets, packaged into CDO’s and rated AAA by the securities rating agencies. CDO & Bond Buyers thought AAA was really safe. All had their incentives. Ratings agencies were incentivized, though not overtly, to give these ratings to “tranches” of the debt. Wall street computer models assessed the risk as low because of the low levels of default seen in recent years due to rising prices.
The lenders had incentive to write as many loans as possible to collect fees. Wall St made fees securitizing the loans. Buyers liked the yields on these new AAA securities. Nobody wanted to miss out on the chance to make more money. Countrywide kept lowering lending standards because they said that they didn’t want to lose market share. Charles Prince (formerly CEO of Citigroup) said that he recognized lending stds were getting stupid but had to keep “dancing until the music stopped” lest he be outperformed by rival investment banks. It was short-term incentives. And someone else was being stuck with the credit risk, so they thought.–
THAT IS WHY LENDING STANDARDS DIDN’T TIGHTEN. SEVERAL INTELLIGENT WRITERS AND ECONOMISTS SAW THIS COMING LONG AGO- 2004 FOR EXAMPLE.
Roach said: “America’s current account deficit is due more to bubbles in asset prices than to a misaligned dollar…. At the core of the problem is one of the most insidious characteristics of an asset-dependent economy – a chronic shortfall in domestic saving…. None of these trends is sustainable.” The Real Estate bubble that enriched mortgage brokers & realtors is screwing up the whole nation.
And I think a healthy dose of skepticism is needed on your blog. Don’t you want diverse viewpoints? Trolling is fun! But I have to get back to work now.
More from Roach written in 2004 explaining the problems from asset bubbles:
http://jfaughnan.blogspot.com/2004/11/more-from-stephen-roach-of-morgan.html
(not in the morganstanley archives)
http://www.morganstanley.com/views/gef/archive/2006/20061107-Tue.html